National Insurance (NI) is a tax on earnings and self-employed profits that funds the UK’s State Pension, NHS, and certain benefits. Unlike income tax, NI is split into classes depending on your employment status. Understanding which class applies to you is essential for working out your true take-home pay.
Class 1 — Employees
Class 1 is paid by employees (and matched by employers) on earnings from employment.
Employee Contributions 2025/26
| Earnings | Rate |
|---|---|
| Up to £12,570 (Primary Threshold) | 0% |
| £12,571 – £50,270 (Upper Earnings Limit) | 8% |
| Over £50,270 | 2% |
The rate drops sharply to 2% above the Upper Earnings Limit — which is why NI is sometimes called “regressive” (higher earners pay a lower marginal rate than mid-range earners).
Employer Contributions 2025/26
Employers pay an additional 15% on earnings above the Secondary Threshold of £5,000. Employer NI is not deducted from your pay slip — it is a cost on top of your salary paid directly to HMRC.
Class 2 — Self-Employed (Flat Rate)
For 2025/26, Class 2 NICs are effectively abolished for most self-employed people — those with profits above the Small Profits Threshold (£6,845) have their Class 2 record treated as paid without any additional charge. Those earning below this threshold can make voluntary Class 2 contributions at £3.50 per week to protect their State Pension entitlement.
Class 4 — Self-Employed (Profit-Based)
Class 4 is the main NI charge for the self-employed and is based on annual profits.
| Profits | Rate |
|---|---|
| Up to £12,570 | 0% |
| £12,571 – £50,270 | 6% |
| Over £50,270 | 2% |
Class 4 is calculated via Self Assessment and paid alongside income tax through your January and July on-account payments.
Class 3 — Voluntary Contributions
Class 3 (£17.45/week in 2025/26) allows anyone with gaps in their NI record to fill them voluntarily. This is often worthwhile for people who have been non-working carers, living abroad, or had long periods of low earnings — as each qualifying year is worth around £330/year more in State Pension at current rates.
Why Your NI Class Matters
- Employed: Your employer handles Class 1 automatically via PAYE.
- Self-employed: You pay Class 4 via Self Assessment. Ensure you are registered with HMRC.
- Director of limited company: You may pay yourself through a mix of salary (Class 1) and dividends (no NI) — this is a legitimate and popular tax-efficiency strategy.
Key Takeaway
If you have recently moved from employment to self-employment (or vice versa), your NI class changes immediately. Failing to register for Self Assessment when becoming self-employed means you may underpay Class 4 contributions and face a penalty. Use our National Insurance calculator to estimate your liability under any scenario.